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Of course Labour doesn’t trust people with their money: the party made little effort to teach them about it

21 March 2014

Labour’s response to the biggest announcement of the Budget, on pensions reform, was never going to be snappy. It would be unfair to expect an Opposition to deliver an immediate response to such a surprising and complex reform. But that’s not to say that the way the party has responded has been exemplary. They were not helped by John McTernan’s Newsnight interview on Wednesday night in which he framed the debate about the pension reforms as being about whether or not governments should trust people to manage their own money. He’s a former party adviser so he doesn’t get the lines to take (which, according to Adam Boulton, were not all that inspiring), but saying ‘you can’t trust people to spend their own money sensibly’ immediately made the debate about whether Labour has any faith in the voters it hopes will elect it into government next year, rather than the details of the policy. As James said yesterday, this is the sort of debate that George Osborne should relish.

Ed Balls distanced himself from those comments, and as Sam Coates reports in The Times, the party is prevaricating over its official policy on these pension reforms, but there was one thing that Balls said that betrayed something very interesting about the Labour mindset on personal finance and trusting people. He told the Today programme:

‘Will there be proper protections and proper financial education so people don’t make the wrong choices and end up running out of their pension pot well before their retirement ends?’

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There is a good reason for a party not to trust people with their own money: if they haven’t been offered any education to understand complicated personal finance issues. Oddly, it was under Labour that this gap became quite clear, but it was not until the Coalition formed did personal finance make its way onto the national curriculum.

Personal finance had always been part of PSHE, but under the new curriculum which starts in September, there is provision for financial mathematics for KS3 and KS4, including lessons on managing money on a day-to-day basis and planning for future financial needs. KS3 pupils will be taught the functions and uses of money and the importance and practice of budgeting, while KS4 pupils will be taught about savings and pensions. In the citizenship curriculum there is explicit mention of pensions, which means that at least students are aware of some of the issues around pensions provision. More widely, lessons on personal financial management will help people to trust themselves with their money – and politicians too.

But given Labour never got beyond saying it planned to include personal financial education in the curriculum, no wonder some of its former advisers think you can’t trust people with their own money.

P.S. Ed Balls’ excellent and assiduous adviser Alex Belardinelli argues in response to this blog that his boss did try to legislate for this when in government, but that it was blocked by the Tories. His point underlines how useless most politicians of all creeds have been on personal finance until recently, and many children have been left in a fair bit of ignorance about money management as a result.

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  • anyfool

    Miss Hardman you say,It would be unfair to expect an Opposition to deliver an immediate response, unfair to reply to something that had been a year in coming.

    Miliband and Balls have both failed against Osborne , Osborne is not a top line performer, his budget was workman like and was to all intents and purpose a normal budget with the exception of the pension changes, anyone with a modicum of forensic ability could have at least put up a passable reply, these two have never in any of the budgets and statements presented by Osborne been able to muster a case on the day, they rely on people in the media to do their job for them. basically they are not cut out for the positions they currently hold.

  • Ron Todd

    Newsnight went out on a golf course desperate to find somebody who thought it was a bad idea to let people control their own money and failed.

  • Mr Creosote

    Izzy’s got a touch of selective amnesia, but then she was probably still in primary school last last time Balls and Brown robbed the pension system.

  • ohforheavensake

    And the Tories have done… what? to deal with this?

    • Nicholas chuzzlewit

      The private pension funds have been denied a cumulative £120 Billion due to the FII changes effected by Brown. What precisely do you expect the Tories to do about it? They have been preoccupied with another of Brown’s legacies, a structural deficit of £167 Billion and a 7.4% contraction of the economy.

  • Kitty MLB

    Of course Labour doesn’t trust people with their own money.
    They do not trust the electorate in the slightest and believe we should not our heads
    about these matters and that we should let lovely Nanny state worry about them instead- nanny knows best !
    After all when has socialism been about personal responsibility and individuality.

  • Smithersjones2013

    Oddly, it was under Labour that this gap became quite clear, but it
    was not until the Coalition formed did personal finance make its way
    onto the national curriculum.

    Which is all very well but it really doesn’t help all those who have not received this training and will be retiring in the next 50 years. Poor Izzy. She really should think about the spin she is given from CCHQ before she regurgitates it.

    There will be millions of people who now thanks to the pension reforms will have much greater control over their pension who will never receive such training.

    Of course it is not the people whose pensions we are talking about that we should be worried about but the unscrupulous financiers many of whom have pet politicians in their pocket who will manipulate pensions preying on uninformed pension holders to benefit themselves who we really need to worry about (and of course the politicians who will periodically find excuses to loot people’s pension provisions).

    PS When politicians enter into and sustain government level aid agreements it is clear that the government do not trust the population with their own money (else they would trust the to donate to charity on their own) so this whole spin about who trusts the voters is one big lie. None of the establishment parties trust people with their money. All politicians (and bureaucrats) think they can spend our money better than we can.

    • Rhoda Klapp8

      If you’ve lived in the world for sixty-odd years and don’t know how money works, you probably won’t have a pension pot. If you can’t find out what to do in this day and age, you will fall victim to an old proverb about a fool and his money and no lesson is likely to help.

  • fozz

    Hopefully what the budget has started is a wake up call on money savviness. There are far too many people sleep walking into financial deep water. The world has altered for good since the banks and politicians let us all down, culminating in 2007/8. Standards of living in the West will take many, many years to regain the position before the economic crisis and we may even never again feel as ‘well off’ as many of us felt then, even though the whole rickety edifice was, as we can now see, largely built on a credit bubble that couldn’t last. The other factor rolling into view is the demographic tsunami we all know about. Only now are the politicians beginning to admit that the state cannot afford to provide the cradle-to-grave support it aimed for a few governments ago. It’s just not affordable so people are now going to be forced to become responsible for managing their own financial lives and plenty of them won’t like that. For many of the financially illiterate, there will suddenly have to be less partying at Nanny State’s cost and more sorting out their affairs at their own expense. This demands financial education and financial awareness.
    Pensions have been getting a bad press; the younger generations are not interested as they have more pressing financial issues – student loans, mortgages and housing, families etc. There are rumblings in the media about the cost of administering pensions, advisors’ fees and the like and soon the press will start to point out that the pensions advisory firms never reside in run-down areas of cities where offices are cheap. Oh no. It has to be Canary Wharf, the Gherkin etc. Pensions advisors also earn a lot, paid for out of the funds of the schemes we are all urged to join.
    So what is the answer? IMHO it’s ‘Lifetime Financial Education & Awareness’ in its widest description where the future lies. Pensions are just one option in a myriad of money issues that affect us all. What matters is income for life after formal work stops and responsible, personal planning around the financial landmarks of a typical life. Pensions are such a narrow field, about to get an even worse press and be even harder to sell. And it serves the pensions industry gravy train right for being so greedy in the past.
    Viva money savviness for all.

  • Rhoda Klapp8

    If the government is to pay for finance lessons, it is themselves who are most in need. Would you take a lecture on keeping your money from an outfit that owes a trillion quid despite being allowed to take other peoples’ money?

  • Colonel Mustard

    ‘you can’t trust people to spend their own money sensibly’

    That’s what Labour really think. Only it’s not just about money. They believe you can’t trust people to do anything or even think anything without their coercive, controlling, nanny laws. They want to control everyone and everything. They think they know better than anyone. It’s in their DNA. Why do you think the Fabians started with eugenics?

    • CharlietheChump

      Right on the button me old dijon

  • Derek

    The average size of a private pension pot is £30k. That is never going to be enough to make much of an impact on the costs of long term care etc. Tying people into inflexible low levels of income rapidly debased by inflation is a colossal disincentive to saving in pensions.

    They proposed rules are much simpler, rather than requiring an actuary to calculate the critical yield under drawdown, the rules are intuitive and fair. So what if £30k is spent on materiel goods, it is up to the individual to account to themselves for their own actions, not Ed Balls.

  • glurk

    When I consider the heap of readies that has disappeared out of my personal pension pot, why would I entrust my savings to anyone, least of all the stock market. At least now I only have myself to blame when the rest disappears.

  • Holby18

    Very insulting to those who have saved in a pension fund for their retirement. Silly arguments put forward re additional cost to the State given that from 2016 there will be a single tier pension which will remove pension credit. It appears to me that there will be no additional monies involved in paying retired pensions. Of course there may be some costs – council tax etc.

    As to the argument that people will cash in their pots – so what – it is their savings and they will be subject to tax. Somehow I do not see many doing this as other taxes may be involved such as Capital Gains.

    The nanny state is in full force from some opposition MPs. It beggars belief that a politician believes they can be trusted more than the pension holder. Annuities according to the FCA’s latest report are poor value and some pensioners have seen their income halved in recent years with low interest rate, QE etc etc. A reminder that it was not individuals but politicians who failed to regulate the banks, who incurred a huge structural deficit which reduced the income from those who saved for retirement.

    Well done – a libertarian policy and I am sure the eminent Mr Webb was behind it as well as many groups representing the retired who have been complaining for years about the awful system of annuities.

  • david trant

    Beware the law of unforeseen consequences, remember when the Tories encouraged people to leave their occupational pensions and take out private ones, it cost the taxpayer billions in compensation.

    • Nicholas chuzzlewit

      Fair point but this is a fundamental issue of trust. I for one am utterly sick of Labour politicians and assorted socialist nutters telling me what to eat, drink, think, etc. Indeed, I have a question for Ed Miliband: is there any single aspect of my, or anybody else’s life, that you consider to be none of your stinking business?

  • Shinsei1967

    I would have thought that those who had bothered saving for their pension in the first place wouldn’t be the sort to blow it all immediately on a fast car and a cruise at 66.

    Surely the people to worry about are the millions of working people who haven’t even a fiver in their pension pot and are just expecting something to turn up before they hit 66.

    • monty61

      Up to a point … some people are effectively forced (or at least strongly persuaded) to save via worplace contribution schemes with their related tax advantages. The fact that Osborne is anticipating £300m a year of spending brought forward suggest precisely that he is expecting a splurge from people living in the moment and not caring much about the longer term.

      Not necessarily a bad thing for the individual (and I for one, now in early 50s, am grateful for the new flexiblity) but the widespread cynicism about is this measure is justified due to the obvious short-term economic (and hence electoral) impact regardless of the inevitability of those spending having less available to them at the other end.

      • AB

        It depends on whether you feel you have enough money coming in every month to be able to afford to forego 5-10% to pay into a pension. If you don’t, the tax advantage is merely theoretical.

        Making the money more easily accessible from age 55 might actually make pension saving more attractive for younger people as eg it would allow them a pot they could imagine drawing on to pay off their mortgage rather than as now, feeling that the money was locked away and could only be used for an annuity when they might actually be quite happy working on until 75 and then relying on the state pension.

        • monty61

          Surely a mortgage is what is is (ie a mortgage) not a pension … though with BTL they seem to have been rather conflated.

        • David Lindsay.

          Possible to live on state pension?
          PS your dog is not as handsome as mine.

  • Bluesman_1

    And you certainly cannot trust Labour with anyone’s money, especially other people’s.

    • David Lindsay.

      You can trust them to invest in infrastructure health and education.
      I guess you mean you cannot trust them to simply bank other people’s taxes, they believe money has to be used for the greater good.

      • Colonel Mustard

        You can’t trust them full stop. They are dishonest, like you, and lie, like you.

        • Bluesman_1

          Indeed citizen Colonel, don’t mention PFI or gold sales or any other of Labour’s magnificent investments on behalf of the greater good.

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